Indonesian rice worker - image by marcveraart on flickr.

Land locked

01 May 2013

More information

John McCarthy is an Associate Professor in the Resources, Environment & Development Program at Crawford School. His expertise includes natural resource policy, agriculture and food security, land tenure, oil palm, forestry and Indonesia. He teaches Food Wars: Food Security and Agricultural Policy (EMDV8082).

Related research centres

A rush from investors to snap up millions of hectares of Indonesian farming land masks a range of significant problems with land acquisition, writes JOHN MCCARTHY.

A recent Oxfam report estimated that investors have bought, leased or licensed up to 227 million hectares of land internationally over the last decade. This bubble of speculative investments — or ‘land grabs’ — has expanded with new market opportunities for food crops, industrial cash crops and bio-energy production along with new carbon sequestration projects.

But despite this incredible growth, only a fraction of land developments associated with these transactions are ever implemented. According to the World Bank, just 30 per cent of developments are in the initial implementation stage. The reasons for postponement and failure of these projects remain largely unexamined.

Our recent paper investigated land acquisition processes in Indonesia, where state planners have allocated up to 3.5 million hectares for new food estates, and there are plans for a further 7 million hectares of oil palm plantations by 2020 and 9 million hectares of timber plantations by 2016. Additionally, the Ministry of Forestry aims to expand forest concession for non-gas and oil mining to encompass 2.2 million hectares of ‘forest land’. This sits alongside ambitions to develop 1.5 million hectares of jatropha to make Indonesia ‘the world’s first biofuel superpower’. Meanwhile, donors and carbon investors compete to advance around 44 carbon sequestration projects over millions of hectares to mitigate climate change.

Historically, many land acquisition plans go awry. Plans bump into existing land uses, patterns of resource access, ecologies and fluctuations in commodity prices. So why do developers promote land acquisitions?

Actors often engage in land acquisition without intending to implement the development license purpose. For instance, while 33 oil palm corporations extend oil palm plantations by 300,000–400,000 hectares each year, by 2010 state agencies had released plantation licenses extending over 26 million hectares. These are often ‘virtual acquisitions’ where investors appropriate subsidies, obtain bank loans using land permits as collateral, or speculate on future increases in land values without developing the land.

Overlapping land claims, with competing indigenous and commercial smallholder land uses, or concession licenses and land use plans, mark Indonesia’s rural landscape. Localised tenure practices can be decisive for accessing land in ‘outer island Indonesia’, even while de jure land acquisition processes remain critical. The interaction between localised vernacular practices and legal processes affects how well legal transactions lead to land use changes.

Companies sometimes try to ‘free up’ land, leading to conflicts. In 2011, the Indonesian National Land Agency reported 2,791 disputes, while the National Commission on Human Rights noted that 738 land disputes generated 4,502 formal complaints of rights abuses. Many conflicts lead to violence and sometimes fatalities.

The Indonesia case is significant for wider discussions of ‘land grabbing’. Documentation on land acquisitions internationally shows similar findings: land acquisition is less widespread than suggested; the acquisition process is often decentralised with local actors playing a key role; planned projects are only partially realised or unlikely to succeed; and policies to avoid speculative uses — such as virtual acquisitions — tend to be poorly implemented.

A final issue is the impact of acquisitions on local development. Policies and schemes often favour large-scale development over local populations. Land is still the primary source of social security for the rural poor, providing a basic means of livelihood, making food more available, and providing a buffer against external shocks. Even virtual acquisitions have opportunity costs: if there is little activity in the field, local people may neither work for the plantation company nor access the land concerned.

Advocates for alternative policies question arrangements that attract large-scale investors with ‘free’ land or forest. Given increasing land values, the state is in a strong position to set investment terms supporting smallholder inclusion. Policy might establish safeguards for smallholder welfare, together with mechanisms for ensuring anti-speculative policies are implemented. With climate change impacting agricultural productivity, increasing the resilience of crops and cropping systems of the poor needs prioritising over large-scale projects.

Filed under:

Updated:  25 February 2016/Responsible Officer:  Crawford Engagement/Page Contact:  Editorial office